President Donald Trump announced new baseline 10% tariffs on all imports into the U.S., with even higher rates for countries viewed as the "worst offenders" of trade imbalances, setting off what is almost certain to be a global trade war. 

The impact on international supply chains is likely to be immense. Reciprocal tariffs are already rattling global markets, driving up costs, disrupting supply chains, and fueling economic uncertainty said Ram Ben Tzion, CEO and co-founder of trade data company Publican, April 2. "Logistics operators will need to increase customs processing and clearance capacity to handle all new regulations and tariff requirements. This will not be a smooth ride," he warned. 

At an April 2 press conference in the White House Rose Garden, delivered after the closing bell on Wall Street, Trump highlighted a list of countries that will be subject to tariffs above the baseline 10% rate, including 20% for the European Union, 34% for China, 49% for Cambodia, 46% for Vietnam and 24% for Japan among many others. The baseline 10% tariff will take effect on April 5, while the rates for countries on the list will come into force on April 9. In 2024, Mexico, Canada and China were the top three trading partners for the United States.

A previously-announced 25% tariff on foreign cars will also take hold on April 3. 

"It’s our declaration of economic independence," Trump told the assembled crowd of reporters, Republican lawmakers and cabinet members. "I've been talking about this for 40 years."

But that independence — which some characterize as economic isolationism — is likely to come at a cost for U.S. businesses and consumers, argued the Retail Industry Leaders Association (RILA) in a statement late April 2. 

“Americans cannot afford another round of price increases,” said RILA senior executive vice president, public affairs, Michael Hanson. “These newly announced tariffs — and the expected retaliatory tariffs on American businesses — risk destabilizing the U.S. economy, undermining the goals of bolstering domestic manufacturing and growth… Before lasting damage is done to the economy and family budgets, we urge the White House to reconsider its course.”

Pushback from the U.S.'s largest trading partners is likely to be swift, including from the European Union, whose 27 member states together represent the largest trading partner, by value, with the U.S. The EU has a “strong plan” to retaliate against tariffs imposed by Donald Trump but would prefer to negotiate, the head of the European Commission, Ursula von der Leyen, said on April 1. “Europe has not started this confrontation. We do not necessarily want to retaliate, but if it is necessary we have a strong plan to retaliate and we will use it,” she said.

Canada has been vociferous in its rejection of the effective dismantling of the U.S.-Mexico-Canada Agreement (USMCA), set under Trump's first term, and which started as Nafta under President Bill Clinton in 1994. The Canadian province of Ontario, economically the largest, has unleashed a number of retaliatory measures, including removing all American-made alcohol from government-run liquor store shelves, banning U.S. companies from government procurement, and imposing, and then rescinding, a 25% tax on electricity sent south of the border. Ontario Premier Doug Ford even threatened in February to cut off electricity supplies to northern U.S. states. 

However, arguments that the announced tariffs are merely a negotiating tactic may still hold water. In the late afternoon of April 2, after Trump's press conference, CTV News in Canada reported that a fact sheet from the White House states that both Mexico and Canada are exempt from the reciprocal tariffs, but that non-compliant USMCA goods will see a 25% tariff, and non-compliant USMCA energy and potash will see a 10% tariff. Tariffs on automobiles remain in force. On the morning of April 2, Premier Ford said in an interview with CNBC’s Ross Sorkin that he believed Canada would drop its tariffs on goods south of the border if Trump stops his trade war. The 25% tariffs on automobiles and automotive parts, and on aluminum and steel still apply to both Canada and Mexico.

Within the U.S., the reaction from Democrats was swingeing. "If I proposed a 10% sales tax on the people of the state of Delaware, I doubt I'd make it into next week," said Governor of Delaware, Matt Meyer, in an interview following the announcement with CBS News. There have been recent signs of internal dissent in the Republican party, too, according to The Guardian. Senator Susan Collins, a Republican of Maine, which shares a border with Canada, told reporters on March 31 that imposing tariffs on Canada was a “huge mistake” that would cause major “disruption in the economies of both countries.” Senator Rand Paul, a Republican from Kentucky, has co-sponsored legislation seeking to terminate the national emergency Trump declared to impose duties on articles imported from Canada.        

Trump claimed that the U.S. had for years been "looted, pillaged, raped and plundered by nations near and far, both friend and foe alike." He said the tariffs will bring jobs and factories "roaring back into our country," and that the revenue from the levies will help to pay down the national debt and reduce taxes. United Auto Workers (UAW) President Shawn Fain told a CBS reporter immediately after Trump's press conference that he "liked" the tariffs. By contrast, Fain said on March 30 that that President Trump's move to strip union rights from federal workers was “deplorable.”

Trump says he is "making America wealthy again." But economists have warned that the move could send the country into a recession, and pass higher costs onto American consumers, with one analysis from the Aston Business School in the U.K. (which will be hit with 10% tariffs) estimating that prices on everyday items in the U.S. could rise by up to 2.7%. Retaliatory rises in tariffs on U.S. exports are likely to make things worse. After-market trading on the S&P and Dow April 2 showed immediate drops.

The tariffs are predicted to have a particularly negative impact on the automotive industry, which for more than 30 years has been integrated across North America — U.S., Mexico and Canada. Evan Smith, CEO of Altana, which applies artificial intelligence to international supply chain data, gives the example of the journey of a typical capacitor that ends up in the car seat of an "American" automobile. It is imported from Asia to Colorado, then moves to Michigan, then into Mexico for circuit board assembly. The board then crosses the U.S. border two more times before becoming part of a car seat that finally goes into a U.S.-bound vehicle. Each crossing results in more tariffs.

"Abrupt trade shifts forced by Trump tariffs appear certain to cause some whiplash, denting economic growth and further driving up the inflation rate that remains stuck above the Federal Reserve's 2% target," said economic policy author Jed Graham, writing in Investor's Business Daily April 2.

Higher costs could also push businesses "to the edge of their trade credit limits," warns Martin Balaam, the CEO and founder of e-commerce software provider Pimberly. 

"From a financial standpoint, I think cash flow is likely to become a significant issue for companies that are already stretched thin," Balaam adds. "Those with heavy debt loads might find themselves dangerously close to breaching financial covenants."